Nato Company was organized a year ago. The results of the company's first year of operations using the absorption costing method follow: Sales (40,000 units @ P33.75), P 1,350,000; Cost of goods manufactured (50,000 units @ 21), P 1,050,000; Ending inventory (10,000 units @ 21), P_210,000; Selling & administrative expenses, P420,000; Net Operating income, P90,000. The company's selling and administrative expenses consists of P300,000 per year in fixed expenses and P3.00 per unit sold in variable expenses. The product cost of P21 is computed as follows: Direct materials – P10.00; Direct labor – P4.00; Variable manufacturing overhead – P2.00; Fixed manufacturing overhead (P250,000/50,000 units) – P5.00. Compute for the operating income under variable

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Chapter1: Financial Statements And Business Decisions
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Nato Company was organized a year ago. The results of
the company's first year of operations using the
absorption costing method follow: Sales (40,000 units @
P33.75), P 1,350,000; Cost of goods manufactured
(50,000 units @ 21), P 1,050,000; Ending inventory
(10,000 units @ 21), P_210,000; Selling & administrative
expenses, P420,000; Net Operating income, P90,000. The
company's selling and administrative expenses consists of
P300,000 per year in fixed expenses and P3.00 per unit
sold in variable expenses. The product cost of P21 is
computed as follows: Direct materials - P10.00; Direct
labor – P4.00; Variable manufacturing overhead – P2.00;
Fixed manufacturing overhead (P250,000/50,000 units) –
P5.00. Compute for the operating income under variable
costing.
Transcribed Image Text:Nato Company was organized a year ago. The results of the company's first year of operations using the absorption costing method follow: Sales (40,000 units @ P33.75), P 1,350,000; Cost of goods manufactured (50,000 units @ 21), P 1,050,000; Ending inventory (10,000 units @ 21), P_210,000; Selling & administrative expenses, P420,000; Net Operating income, P90,000. The company's selling and administrative expenses consists of P300,000 per year in fixed expenses and P3.00 per unit sold in variable expenses. The product cost of P21 is computed as follows: Direct materials - P10.00; Direct labor – P4.00; Variable manufacturing overhead – P2.00; Fixed manufacturing overhead (P250,000/50,000 units) – P5.00. Compute for the operating income under variable costing.
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